New Brazilian president moves to calm investors

Da Silva meets with Chavez and Castro, but government promises free-market route KEVIN G. HALL Knight Ridder

RIO DE JANEIRO, Brazil - On his first day in office, Brazilian President Luiz Inacio Lula da Silva met Thursday with the leftist leader of Venezuela but also sought to calm investors' fears that he would abandon the free-market policies that Brazil has followed for more than a decade.

As president of Latin America's most populous nation, da Silva's first steps are being closely watched in Washington and throughout the Americas amid concern that he might team up with leftist leaders from the region.

Da Silva had a long working breakfast with Venezuela's embattled socialist president, Hugo Chavez, and was scheduled to dine with Cuban strongman Fidel Castro.

Da Silva's first day in office fell behind schedule because Chavez arrived almost an hour late for breakfast, after staying up until 4 a.m. talking with Castro. Chavez said da Silva agreed to consider his request to send state oil workers to Venezuela to help reactivate oil production there, which has been hurt by a monthlong national protest against his government. Chavez also wants state oil companies in the region to unite and form what he calls Petroamericas, one large, regional oil company.

Mindful that investors fear da Silva's leftist past and may be spooked by his chumminess with Castro and Chavez, his government signaled that Brazil would stick to the free-market policies that previous governments followed, which brought in more than $150 billion in direct foreign investment.

The new finance minister, Antonio Palocci, announced Thursday that da Silva will ask Brazil's Congress to grant operational autonomy to the Central Bank. That indicates to investors that da Silva seeks to remove politics from decisions about monetary policy. In a nod to investors last month, he named Henrique Meirelles, a former head of U.S.-based BankBoston, as Central Bank president.

Palocci also promised Thursday to announce economic goals for the da Silva administration by midmonth.

"These goals will make clear our commitment to management of a budget that is responsible and consistent," Palocci said, adding that incoming ministers will be ordered to cut their budgets.

He repeated da Silva's commitment to honoring agreements that predecessors had signed. Under the terms of a $30 billion rescue package that the International Monetary Fund provided in 2002, the new government must have a budget surplus equivalent to 3.75 percent of gross domestic product, the sum of all the country's goods and services.

Da Silva's presidency also began with a direct challenge to U.S. trade policy. His new foreign minister, Celso Amorim, named a vocal critic of U.S.-led regional trade negotiations as Brazil's second-highest-ranking diplomat Thursday. Amorim, Brazil's top trade negotiator, named Samuel Pinheiro Guimaraes the foreign ministry's secretary general. Amorim's predecessor fired Guimaraes from his post heading the ministry's International Relations Research Institute after he criticized Brazil's participation in talks to create a Free Trade Area of the Americas by 2005.